Glass-Steagall

It is 2013, five years after the start of a recession and two and a half years after so called financial reform legislation was passed. Yet, Too Big To Fail Banks have just gotten bigger, the financial system is still at risk and most of the disaster was buried in a mountain of bail out money.

Barclays was busted for manipulating the LIBOR. The London Interbank Offered Rate is the interest rate banks charge to lend to each other. This key interest rate sets most banking transactions, including retail. Manipulating the Libor is like being a casino with crooked roulette wheels and loaded dice.

Barclays has been fined £290m ($450m) for trying to manipulate a key bank interest rate which influences the cost of loans and mortgages.

Marcus Agius will step down from Barclays as soon as Monday, amid fallout from the bank's $453 million settlement of probe into Libor manipulation.

On Wednesday the U.K's Financial Services Authority announced to the world Barclays manipulated the Libor and was fined. Below is some of the FSA's press release:

The FSA has today announced that it has found serious failings in the sale of interest rate hedging products to some small and medium sized businesses (SMEs). We believe that this has resulted in a severe impact on a large number of these businesses. In order to provide as swift a solution to this problem as possible we have today confirmed that we have reached agreement with Barclays, HSBC, Lloyds and RBS to provide appropriate redress where mis-selling has occurred.

The below Bloomberg Law interview, or shall we say cage match, is just amusing. First, Chris Whalen tries to claim the reason JPMorgan Chase placed a bet that will lose $2 billion or greater is due to JPMorgan Chase being distracted by those pesky regulators. Yes, you will laugh out loud at this.

We all know Too Big To Fail Banks became even bigger from the financial crisis. We also know previous mergers and acquisitions along with financial deregulation allow banks to own, invest and advise, often on the same transactions or deals. We also know time and time again, this has led to strong conflicts of interest and disaster for shareholders, taxpayers and customers.

The latest is an acquisition deal of El-Paso, a natural gas pipeline operator, by Kinder Morgan, a competitor. Seems Goldman Sachs made off with a $25 million fee for advising El-Paso, all the while having a 19%, $4 billion dollar stake in Kinder Morgan, plus a couple of seats on the Kinder Morgan board to boot.

There is a clear conflict of interest on the El Paso-Kinder Morgan deal. The stink is so bad, Goldman Sachs even brought the wrath of Delaware Chancellor Leo Strine who called the deal tainted with disloyalty. Of course the acquisition of El Paso by Kinder Morgan goes through anyway, in spite of the court admonishment.

Another financial crisis, a prolonged recession, or changing political ideologies could cause a re-examination of the status quo and lead to a decision to break up the big banks. If that should happen, policy makers could well take another look at the Public Utility Holding Company Act of 1935 as a model for accomplishing such a breakup over a limited time span of, say, seven years. The political mood is already shifting. The 1980s mantras -- government regulation as problematic, free-market competition as an unquestioned good, financial engineering as worthwhile innovation and finance as more important than commercial and industrial enterprise -- are now being reconsidered. This could lead to a more responsible balance between government, finance and industry. Dodd-Frank, despite its length and complexity, is only the beginning of real regulatory reform. It's a continuation of the complexity of already overly complex financial and regulatory systems. What we need is a simple regulatory scheme to create a simpler banking system.

Despite a $700 Billion Wall Street Bailout, despite the Federal Reserve scooping over a $Trillion of questionable bank assets onto its balance sheets, despite an alphabet soup of new programs designed to aid the banking system, and despite -- or perhaps in part because of -- the almost-daily rule changes in the banking system I have dubbed Global Financial Calvinball; the economy and the financial emergency continues to worsen.
This is imho precisely because, as Jim Kunstler puts it: